Closed‐form lower bounds for the price of arithmetic average Asian options by multiple conditioning

Geon Ho Choe and Minseok Kim

Journal of Futures Markets, 2021, vol. 41, issue 12, 1916-1932

Abstract: We present closed‐form lower bounds for the price of arithmetic average Asian options under geometric Brownian motion. Lower bounds are found by conditioning on multiple normal variables, each of which is a weighted sum of Brownian motions. Numerical results show that our lower bounds are close to Monte Carlo prices and improve single conditioning methods especially for high volatility and long maturity.

Date: 2021
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